Real Yield.

In plain English

Real yield is the interest or return an investment pays after accounting for inflation. If a bond yields 5 percent and inflation is 3 percent, your real yield is about 2 percent, because that is how much your purchasing power actually grew. The plain, before-inflation number is the nominal yield. Real yield is the honest measure of whether an investment is truly getting you ahead, and it can even be negative when inflation outruns the stated yield.

01Why it matters

Real yield tells you whether your money is actually gaining buying power or just keeping up with rising prices, which the nominal rate alone can hide.

02The math, step by step

A savings account pays 4 percent while inflation runs 3.5 percent. The real yield is only about 0.5 percent, so your buying power barely grows.

03What this is NOT